What are 'Raw Materials'

Raw materials are materials or substances used in the primary production or manufacturing of goods. Raw materials are often referred to as
commodities, which are bought and sold on commodities exchanges around the world. Raw materials are sold in what is called the factor
market, because raw materials are factors of production along with labor and capital.
BREAKING DOWN 'Raw Materials'
Raw materials are accounted for in an intermediate inventory account used by manufacturing companies. As raw materials are used, raw
materials inventory is decreased, while work-in-progress accounts are increased. When the work-in-process items are completed, they are
transferred to finished goods, and are accounted for as cost of goods sold upon sale.
Direct vs. Indirect Raw Materials
Raw materials may be divided into two major classifications: direct and indirect. Direct raw materials are materials that can be directly traced to
the finished product. For example, lumber may be directly traced to a completed chair, so in this situation, lumber is a direct expense.
Indirect raw materials are items that cannot be specifically traced. An example is the wood finish placed on the manufactured chair. Although the
entire drum of wood finish is evident, the specific wood finish within the drum cannot be traced to the exact location on each produced chair.
Raw materials may also be classified as indirect if the total dollar amount is immaterial.
Fixed vs. Variable Costs
Another major classification that can be used to describe raw materials is "fixed or variable costs." Fixed costs relate to charges that do not vary
based on inputs or production levels. Variable costs relate to charges that fluctuate based on the quantity being produced. For this reason, raw
materials are typically variable manufacturing costs because they are only purchased during the production of a good. If no good is being
produced, the cost is not incurred, and because it can be avoided by reducing production, raw materials are a variable cost.
Direct Raw Materials Budget
A manufacturing entity calculates the amount of direct raw materials needed for specific periods, to ensure shortages do not occur. Also, with
the specific amount of direct raw materials, an entity has the ability to reduce inventory stock and security, lower ordering costs, and reduce the
risk of material obsolescence. The direct raw materials budget is calculated by adding the raw materials required for production to the
anticipated or desired ending balance of direct raw materials. This summation is reduced by the amount of direct raw materials on hand at the
beginning of the period. The final figure is the total direct raw materials that need to be purchased.

The processing of raw materials into finished goods through the use of tools and processes. Manufacturing is a value-add process, allowing
businesses to sell finished products at a premium over the value of raw materials used.
BREAKING DOWN 'Manufacturing'
Humans have sought ways to turn raw materials, such as ore, wood, and foodstuff, into finished products for most of history. By refining and
processing this raw material into something more useful, individuals and businesses were adding value. This added value carried with it a higher
price, making manufacturing a profitable endeavor. People began to specialize in the skills needed to manufacture goods, while others provided
funds to businesses to purchase tools and materials.

How products are manufactured has changed over time. The amount and type of labor required in manufacturing varies according to the type of
product being produced. On one end of the spectrum, products are manufactured by hand or through the use of basic tools using more
traditional processes. This type of manufacturing is associated with decorative art, textile or leather work, carpentry, and some metal work. On
the other end of the spectrum, mechanization is used to produce items on a more industrial scale. This type of manufacturing does not require
as much manual manipulation of materials, and is often associated with mass production.
The industrial process used to turn raw materials into products in high volumes emerged during the Industrial Revolution of the 19th century.
Prior to this period, handmade products dominated the market. The development of steam engines and related technologies allowed companies
to use machines in the manufacturing process, reducing the number of personnel needed to produce goods while also increasing the volume of
goods that could be produced.
Mass production and assembly line manufacturing allowed companies to create parts that could be used interchangeably, allowing finished
products to be made more readily by reducing the need for part customization. The use of mass production techniques in manufacturing was
popularized by the Ford Motor Company in the early 20 th century. Computers and precision electronic equipment have since allowed companies
to pioneer high tech manufacturing methods. Products made using these methods typically carry a higher price, but also require more
specialized labor and more expensive capital inputs.
The skills needed to operate the machines and develop the processes used in manufacturing have changed drastically over time. Many low skill
manufacturing jobs have shifted from developed countries to developing countries, as labor in developing countries tends to be less expensive.
More skilled manufacturing, especially of precision and high-end products, tends to be undertaken in developed economies. Technology has
made manufacturing more efficient and employees more productive, meaning that, even as the volume and number of goods manufactured has
increased, the number of workers required has declined.
Economists and government statisticians use various ratios when evaluating the role manufacturing plays in the economy. Manufacturing value
added (MVA), for example, is an indicator that compares manufacturing output to the size of the overall economy. It is expressed as a
percentage of GDP - Gross Domestic Product. The ISM Manufacturing Index uses surveys of manufacturing firms to estimate employment,
inventories, and new orders, and is an indicator of the health of the manufacturing sector.

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Waste Reduction and Raw material conservation are the most

important functions in Waste Management Saves Environment and
Money:

A. Introduction Waste management has various functions; they are:

collection, transport, processing (waste treatment), recycling or disposal of
waste materials; usually produced by human activity, in an effort to reduce
their effect on human health or local aesthetics or amenity. A sub-focus of
waste management, in recent decades, has been to reduce waste materials
effect on the natural world and environment by conserving raw materials used
and to recover resources from wastes, i.e., recycle of wastes. Waste
management can involve solid, liquid or gaseous substances with different methods and fields of expertise for each.
In fact, generation of waste in any industry is a result of using materials inefficiently. It costs your business money. The costs
of wastes are twofold: first you fail to gain the desired benefits by using more raw materials and second, you also have to pay
disposal costs for wastes. Apart, environment gets dirtier causing lot of air, water pollution and other related nuisances.
Waste is also the inefficient use of utilities such as electricity, water, and fuel, which are often considered unavoidable
overheads. The costs of these wastes are generally underestimated by managers. It is important to realize that the cost of
waste is not only the cost of waste disposal, but also other costs such as:
* Disposal cost
* Inefficient energy use cost
* Purchase cost of wasted raw material
* Production cost for the waste material
* Management time spent on waste material
* Lost revenue for what could have been a product instead of waste
* Potential liabilities due to waste.
a. By reducing waste, you can automatically make your processes more efficient and more competitive. The benefits of
operating your business more efficiently are clear including reduced overhead costs, savings in time and money and
increased competitiveness. Better economy is achieved as you save additional costs for maintaining pollution free
environment.
Although you can sometimes use waste as a resource and save money, it is more efficient to reduce waste at the point of
origination. Waste activities such as recycling and recovery use energy so the priority should be to reduce waste in the first
place. Businesses that take a strategic approach to minimizing waste are likely to save the most money. Experience in many
countries suggests that businesses across a range of industries can save about 10 per cent of turnover by employing waste
minimization techniques.
b. Immediate cost-savings can be achieved by:
(i) Reviewing your activities and processes and making simple changes such as printing or photocopying on both sides of the
paper;
(ii) Designing packaging so that it can be reused;
(iii) Reusing any waste you produce until it no longer has any value and then recycling the materials.
Customers, employees and potential investors are all becoming more aware of environmental responsibility and failure to
take action could affect your business.
c. You face rising energy and waste disposal costs, increased legal obligations and higher stakeholder expectations. In some
industries, producers now have ultimate responsibility for the disposal of their products, not just their creation. Adopting a
waste strategy means that you will be better prepared for any new legislation for reduction as well as for better disposal of
your products (finished goods and wastes).
The penalties for failing to manage environmental risks properly can also be substantial. You could experience damage to
your reputation, disruption to your business or financial penalties.
Resource productivity means extracting the most value from resources, making the best use of renewable resources and
minimizing waste produced. It has the potential to drive down costs by reducing waste and pollution and will create
opportunities for growth through process and product innovation.

B. Source Reduction of waste Stopping waste before it starts way to enhance environmental cleanliness:
Thus, waste minimisation can be defined as systematically reducing waste at source. It means:
* Prevention and/or reduction of waste generated
* Efficient use of raw materials and packaging
* Efficient use of fuel, electricity and water
* Improving the quality of waste generated to facilitate recycling and/or reduce hazard
* Encouraging re-use, recycling and recovery.
Source reduction, also known as waste prevention or pollution prevention, is the elimination of waste before it is created.
Source reduction is decreasing the amount of materials or energy used during the manufacturing or distribution of products
and packages. It basically involves the design, manufacture, purchase or use of materials and products to reduce the amount
or toxicity of what is thrown away. Source reduction means stopping waste before it happens.
Because it stops waste before it starts, source reduction is the top solid waste priority of environmental protection agencies of
many of the developed countries. These innovations conserve resources and reduce packaging waste, while continuing to
provide performance, value and convenience to the consumer.
Source reduction is not the same as recycling. Recycling is collecting already used materials and making them into another
product. Recycling begins at the end of a products life, while source reduction first takes place when the product and its
packaging are being designed. In fact, the best way to think about source reduction and recycling is as complementary
activities combined, source reduction and recycling have a significant impact on preventing solid waste and saving
resources.

a. Source Reduction Techniques:

Four techniques of waste minimisation are briefly discussed below:
1) Good Housekeeping- Systems to prevent leakages & spillages through preventive maintenance schedules and routine
equipment inspections. Also, well-written working instructions, supervision, awareness and regular training of workforce
would facilitate good housekeeping.
2) Process Change Under this head, four techniques are covered:
(i) Input Material Change Substitution of input materials by eco-friendly (non-toxic or less toxic than existing and
renewable) material preferably having longer service time.
(ii) Better Process Control Modifications of the working procedures, machine-operating instructions and process record
keeping in order to run the processes at higher efficiency and with lower waste generation and emissions.
(iii) Equipment Modification Modification of existing production equipment and utilities, for instance, by the addition of
measuring and controlling devices, in order to run the processes at higher efficiency and lower waste and emission generation
rates.
(iv) Technology Change Replacement of the technology, processing sequence and/or synthesis route, in order to
minimise waste and emission generation during production.
3) Recycling
i) On-site Recovery and Reuse Reuse of wasted materials in the same process or for another useful application within
the industry.
ii) Production of Useful by-product Modification of the waste generation process in order to transform the wasted
material into a material that can be reused or recycled for another application within or outside the company.
4) Product Modification Characteristics of the product can be modified to minimise the environmental impacts of its
production or those of the product itself during or after its use (disposal).
b. Importance of source reduction of waste:
(i) Source reduction conserves raw material and energy resources. Smaller packages and concentrated products typically use
fewer materials and less energy to manufacture and transport.
(ii) Source reduction reduces releases to air, land and water. For example, it takes less fuel to transport lighter weight
materials.
(iii) Source reduction cuts back on what has to be thrown away. That helps keep solid waste disposal costs down, which is
good for municipal budgets and consumers.
(iv) Source-reduced products take up less space, and are more efficient and easier to use.
c. Source reduction is the highest goal in the solid waste management hierarchy Reduce, Reuse, Recycle: As
explained above, by itself, recycling does not address the issue of wasteful product use. When recycling is coupled with
source reduction, however, wasteful purchase and use of products is minimized. Whenever possible, reduce or reuse first,
then recycle. The practice of source reduction benefits the environment through reduced energy consumption and pollution,
conservation of natural resources, and extension of valuable landfill space. It can also have economic benefits by reducing
costs associated with transportation, disposal or recycling of waste. Plus, source reduction can save you money every day.
Everyone can participate in source reduction. REDUCE OR REUSE FIRST, THEN RECYCLE.
C. Waste reduction in production process and reduction in use of raw materials gives significant effect on
profitability and promoting cleaner environment:
Waste arising out from production processes can have a significant effect on your profitability. The challenge is to reduce this
waste without undermining the effectiveness of the process. The reduction of waste generation also mitigates the wastes
disposal and recycling problem; thereby improving the environment standard.
a. During the production process some typical problems include the excessive consumption of energy or raw materials, losses
in the production process itself, rejection at the inspection stage and failure when the customer is using the end product. In
order to reduce waste you have to be very much conversant with the process. To know where waste is arising, you need to
understand your processes and technology used. To do this, you could produce a flowchart of your operations. You can then
discuss the process with your employees and get their feedback on where waste is occurring, and what you can do to reduce
it. This approach helps you focus on the most important areas, with more detailed analysis of the operation at various
segments of the process, if necessary.
b. Common things you might do to improve the efficiency of production processes and reduce waste include:
(i) reusing rinse water in cooling systems;
(ii) regularly checking that equipment is correctly calibrated;
(iii) reducing unnecessary stoppages in the production line;
(iv) upgrading or replacing old equipment;
(v) minimizing spills or leaks;
(vi) using sealed systems to allow all the waste to be collected in one place, without leakage, so that as much waste as
possible can be reused, recycled or disposed of correctly.
c. An effective waste minimization program scrutinizes the whole business from suppliers to product design, production
practices to disposal. It will also enable you to minimize the different input resources, including water and energy, chemicals
and solvents, and paper and electrical equipment.
Preventing waste from occurring in the first place is the most efficient solution. Constant monitoring of your production
processes and preventive maintenance can ensure waste is avoided before it occurs.
d. Reduce your use of raw materials at the fullest extent Given current levels of consumption; recycling rubbish isnt
sufficient to tackle the amount and type of waste produced. Waste needs to be designed out of the system at source, and
what cannot be designed out should be reused.
(i) Developing better closed loop systems where waste is treated as a resource eliminates the need for unused
resources and waste disposal.
(ii) If youre a manufacturer, using raw materials more efficiently can bring significant cost savings and environmental
benefits. To do this, you should look at all aspects of your production process, including transportation and warehousing.
(iii)Try to ensure you dont over-order materials for one-off or bespoke jobs. Check how you handle and store raw materials.
Even failing to empty all bags and containers properly could lead to significant amounts of waste.
(iv) Look carefully at the waste youre disposing of. Could any of it be reprocessedand put back into the production process?
Could it be reused for another purpose? For example, packaging from suppliers can be reused to transport your own
products. Also, waste water from manufacturing processes could be reused for low grade purposes.
(v) Another important area to consider is product design. Are there ways of designing your product so that it uses fewer
raw materials? Try to use materials that have already been recycled or that are easier to recycle.
(vi) Issues such as raw material use, waste production, energy consumption and emissions to the atmosphere should be
considered at each stage of the product lifecycle.
D. Suggestions for better waste management:
You can help reduce waste at home by learning basic waste-saving habits. You can buy products that come in concentrated
forms or products that use minimal packaging. And you can reuse, repair, recycle, or compost products that would otherwise
be thrown away.
REDUCE
* Buy the largest size package and products that do more than one thing; for example, shampoos that include conditioners.
* Buy concentrated products or compact packages, such as frozen juices and fabric softeners you mix with water at home.
* Look for products with minimal packaging. You will be using fewer natural resources, and you will have less to throw away.
* When you mow your lawn, leave grass clippings on the ground instead of bagging them. Grass clipping decompose quickly,
adding nutrients to the soil.
REUSE
* Buy reusable products such as rechargeable batteries.
* Pass on magazines, catalogues, and books to neighbors, hospitals, schools, and nursing homes.
* Reuse plastic or glass containers for food storage, nails, and so on.
* Reuse plastic shopping bags, boxes, and lumber.
* Reuse wrapping paper, gift bags, and bows. Use the Sunday comics for wrapping childrens birthday presents.
REPAIR
* Try to repair before you consider replacement of lawn mowers, tools, vacuum cleaners, and TVs.
* Donate items you cant repair to local charities or vocational schools.
* Keep appliances in good working order. Properly maintained appliances are less likely to wear out or break and will not
have to be replaced as frequently.
RECYCLE
* Shop for items that are recyclable or are made from recycled materials.
* Recycle newspapers, plastics, glass, and cans.
* If a recycling program does not exist in your community, contact community officials to see if it would make sense to start
one.
COMPOST
* Compost yard and kitchen waste. Compost makes an excellent fertilizer and improves the soil.
* If theres no room for compost pile, offer compostable materials to community composting programs or garden projects
near you.
E. Conclusion The biggest challenges in waste reduction programme lies in sustaining the process. The enthusiasm of the
implementing team wanes off with time. Such tragic ends should be avoided. Backing out from commitment, predominance of
production at any cost, absence of rewards and appreciation, and shifting of priorities are some of the commonly encountered
reasons, which one should check and avoid. Also monitoring and review of the implemented measures should be
communicated to all employees in the industry so that it fans the desires for minimizing wastes.
WASTE REDUCTION, REUSE, AND RECYCLING ALLOW US TO USE FEWER RAW MATERIALS AND CONSERVE
NATURAL RESOURCES, PRESERVING LANDFILL SPACE AND MINIMIZING ENERGY USE.
THE IMPACT IS DIFFICULT TO IGNORE.